The rupee hit a new intra-day low of 147 to the US dollar in the open market on Wednesday and closed at a record low at 146.25 as demand for dollars remained high, primarily in anticipation of a further depreciation of the local currency in the wake of a loan agreement with the International Monetary Fund (IMF).
Prime Minister Imran Khan held a meeting during the day with major currency dealers to discuss how to strengthen the country’s foreign currency reserves and plug leakages and misuse, if any.
In the inter-bank market, however, the rupee remained stable at 141.39. The rupee has continued to stay stable at the current level in the inter-bank market for over a month now, according to the central bank.
With this, the spread between the rupee value in the inter-bank market and open market has reached a staggering Rs4.90, or 3.5%. Earlier, the central bank had asked foreign exchange companies to maintain the rupee spread at around 1%.
A few currency dealers said they were acutely short of dollars as potential foreign currency sellers were reluctant to come to the exchange counters while buyers were ready to purchase dollars at higher prices. Exchange Companies Association of Pakistan (ECAP) Secretary General Zafar Paracha said speculation the government had agreed to let the rupee depreciate by another 20% and up to 165-170 under the IMF loan programme messed up things in the open market.
Pakistan has finalised a 39-month loan programme worth $6 billion with the IMF.
The programme binds Pakistan to let currency market determine the rupee-dollar exchange rate and the state should end its control of the exchange rate. Under the programme, the central bank may increase the key interest rate by two percentage points and energy tariffs may also be revised upwards.
An official at the SBP said they were monitoring the situation in the open market. “If and when the central bank feels the need, it will either supply dollars and/or summon currency dealers to stabilise the rupee in the open market,” he said.